THE RICHEST MAN IN BABYLON – BOOK SUMMARY: The Richest Man in Babylon is a classic book written by George S. Clason in the year 1926. Even though this book was written almost a century ago, the advice given in the book is still as relevant as it was then and it will continue to be so in times to come.
The Richest Man in Babylon is a classic book written by George S. Clason in the year 1926. Even though this book was written almost a century ago, the advice given in the book is still as relevant as it was then and it will continue to be so in times to come. This is a very interesting and inspiring book. This book talks about the fundamental principles for amassing wealth and controlling finances.
In the background, this book talks about the city of Babylon which was the richest city in the world, known for its great wealth. This city was founded in 2300 BC which was located in present-day Iraq.
The story revolves around Akrad who was proclaimed to be the richest man in Babylon. Here Akrad in conversation with his friends talks about his teachings with respect to wealth creation and building a sound financial foundation.
THE RICHEST MAN IN BABYLON – BOOK SUMMARY
Let us now explore seven Wealth Building Lessons from The Richest Man In Babylon:
(1) Start thy purse to fattening (Pay yourself first)
The crux of the book the first point i.e. pay yourself first. Akrad tells his friends how he was very poor in the past and then he sought advice from a very wealthy man. The wealthy man agreed to give him the secret to wealth in exchange for his (Akrad’s) work for him.
The secret to the success of a wealthy man was that whatever he used to earn, he paid himself first from his earning. Akrad recommended keeping aside at least 10% of the net income aside. This is applicable even to those who are paying off debt. This becomes difficult in the beginning, but with persistent efforts can be mastered. Imagine yourself as a third person and pay yourself first. Only saving 10% every month, by the end of the 10th month, we will have money equivalent to one month’s earning is by our side.
(2) Control thy expenditures (Cut down expenses)
This is all about controlling expenditures and living within our means. Akrad tells to avoid the trap of high expenditure due to lifestyle inflation. He tells that unless we protest strongly, what we call our normal expenses, will be greater than or equal to our income. Thus this needs to be addressed and we must live below our means.
(3) Make thy gold multiply (Making money work for us)
Akrad tells us that we must invest our saved money by making wise investment decisions. We must take advantage of time and compounding interest. We must invest our money with the ones who are experts in their field.
(4) Guard thy treasures against loss (Use insurance to protect wealth)
Here Akrad advocates for the protection of principal from loss. He says that the penalty of risk is the potential of loss. We must go to getting adequate insurance for wealth. This can be achieved by diversification.
(5) Make of thy dwelling a profitable investment (Home is our biggest expense)
Of all the principles given in the books, this may be the most debatable. Here Akrad tries to say that expenses for our home are the biggest expense that we have to tackle. He tries to say that instead of paying to the landlord for rented accommodation, paying for a mortgage is better because eventually, we end up owning the house.
(6) Ensure a future income (Having a retirement plan)
Here Akrad suggests that We should have a retirement plan if we want to retire comfortably. We can do that by setting aside money to be invested for our retirement. Compounding interest is known as the eighth wonder of the world. It is said that ‘’ money is of a prolific generating nature. Money can beget money, and its offspring can beget more’’. The earlier we can start putting money away for our retirement the better.
(7) Increase thy ability to earn (Invest in ourselves)
Akrad says to position ourselves to make more money by improving our skills and making ourselves more competent. This can be done by investing in ourselves. We should train ourselves to earn more, go for enhancing skills, generating side income and start making more money
The remaining part of the book is also filled with deep insight and knowledge. It says we must choose wisdom over money. It teaches to borrow sensibly as unintelligent of debt will become a burden. We must work very hard in order to be lucky.